1. Consider a perfectly competitive market with a price of $12, where each firm has a cost function of c(q) = 50+ 2q +0.5q². a) Is the market in long-run equilibrium? Explain why or why not. b) What is the value to a firm of a cost-saving process innovation that reduces the cost function to c(q) = 10 + 0.5q²? c) Illustrate this innovation graphically using a well-labeled diagram.

1. Consider a perfectly competitive market with a price of $12, where each firm has a cost function of c(q) = 50+ 2q +0.5q². a) Is the market in long-run equilibrium? Explain why or why not. b) What is the value to a firm of a cost-saving process innovation that reduces the cost function to c(q) = 10 + 0.5q²? c) Illustrate this innovation graphically using a well-labeled diagram.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter8: Perefect Competition

Section: Chapter Questions

Problem 8SQP

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